Paul Lachine

Changing China’s Growth Path

The goal of China's new Five-Year Plan is to recompose (not expand) aggregate demand, in order to sustain growth and avoid the diminishing-returns trap that is the principal risk of the current investment pattern. But changing that pattern will require many simultaneous transitions.

MILAN – China is poised to begin its transition from middle-income to developed-country status. Relatively few economies (five to be precise, all in Asia: Japan, South Korea, Taiwan, Hong Kong, and Singapore) successfully managed this transition while sustaining high growth rates. No country of China’s size and diversity has ever done so.

China’s 12th Five-Year Plan, adopted last month, provides the road map it will follow.  Yet it is not really a plan; rather, it is a coherent interconnected set of policy priorities to support the economy’s structural evolution – and thus to maintain rapid growth – over the period of the plan and beyond.

So a great deal is at stake, both internally and externally. Growth in the world’s emerging economies now depends on China, the main export partner for a growing list of major economies including Japan, South Korea, India, and Brazil.

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